All Forum Posts by: Deanna O.

Just read "All Polk County" reviews -- Yowza! For what it's worth, while some mgmt companies that act like that, most don't, and some are quite good. I'm in CA (so not much use for you), but have been renting from the same mgmt co for over 20 years. They've definitely learned stuff over that time frame, so maybe look for one that's been around awhile?

OK, so this is all my personal opinion, (probably worth at least 2x what you are paying for it ; )

Use a lawyer (title company probably best) if you do a note, but CPA FIRST and it needs to be one who understands RE. You will be looking at depreciation recapture taxes (remember all those great tax breaks you got to deduct? yeah, about that...). Hopefully you find a tax whiz who can explain it all to you in a way that makes sense.  Sometimes you can structure a sale to minimize the tax hit, but it will depending on your complete tax situation. It may be that income derived from a note can be spread over years rather than hitting all in the sale year (to be clear, I am NOT a professional, NOT giving tax advice, yadda yadda yadda and so forth). 

Out of curiosity, why not just doing a conventional purchase for at least part of the purchase price? There are all kinds of first-time buyer programs, and they should be able to get a much better interest rate than you can. If you are committed to selling to this person you can afford to wait while they jump through the hoop. Now if they can't qualify for any loans I'd see that as a big red flag for selling to them at all. The whole point of all the qualifying paperwork is that banks have a generally good idea of (over millions of loans) who is likely to be able to keep up the payments and who can't. There are certainly exceptions (all cash all the time folks tend to have more $ in the bank and credit rating of 0 -- that was my situation when I purchase my first house).  For what it's worth, your renter could be looking at a HIGHER housing cost if they own. Typical renters calculate mortgage, taxes and insurance, and think WooHoo! Cheaper than rent! They forget long-term maintenance like hot water heaters, plumbing and roofs. You are doing a person no favor by selling them a house if they can't keep up on the payments as well as repairs (either because their income is too low, or because their money management skills are poor). It really sucks to foreclose on anyone, but especially if you were trying to help them out.

BTW, if you do decide to go through with the sale it doesn't need to be an either/or. You can do a hybrid where they get conventional financing for part of the price (probably the current loan amount, if any) and you "carry paper"(ie take a trust deed/note) for the remainder.  BTW, if you do a hybrid your TD would almost certainly be in the second position, so you want to understand the full implications of what that means. If for some reason you wouldn't be able to take the property back in a market downturn, you probably don't want to do an owner carry. 

Mike

So just to tease you a bit, you are asking "Why oh why won't anyone sell me their property for a fraction of what they can get by selling it on the open market in a weekend?"

Which is sort of your answer. The current market is so wildly overheated that even the worst dog of a property can trigger a bidding war, with offers that come in over asking, over appraisal, and no contingencies. Shockingly, the owners that respond to postcards want to sell for prices that simply don't crunch as rentals.

I can tell you that from the other side of those brightly-colored post cards (the one the I tossed out today was bright green), that property owners are being flooded with postcards from all over the country (green was an outfit in FLA). Out of curiosity I called a couple. They all seem to be just kind of desperately hoping that I'll be willing to sell at 2017 prices. Now you have to understand that every week my mailbox is full of over-colored, oversized post cards from local Realtors telling me how much my neighbor's houses have sold for in a matter of a few days. Why would I be willing to sell to some random guy in Florida at 70% of FMV, when I can get 110% by next week with a local Realtor?

Be realistic,  be patient, and be creative. Think out of the normal boxes.  Possibly you can figure out unconventional terms that will fit the needs of some of potential sellers, such as being willing to do below-market rent-backs to owners.  

You might also just have to sit out the market for a bit while until things cool off a bit. This market won't go on it's current trajectory forever (though whether it's a rerun of '06 or '71 remains to be seen). 

I live where good jobs are more plentiful, and but chose to invest where I could afford to purchase rentals with relatively less risk (nothing reduces rental stress like knowing I could easily pay the mortgage out of pocket if needed). It's worked out quite well; I own 3 decent SFR properties in far northern rural CA, paying less in mortgage, taxes than owning a tiny 2/1 condo in San Diego.

BTW, the actual "profit" isn't exactly clear. As I read it, $1025 is your net after mortgage and escrow (by which you mean taxes/insurance?). CAPEX, vacancy and maintenance aren't addressed, but neither is pay down of the principle (the part of the mortgage payment that isn't interest is actually income). Do you know what your ACTUAL net income is off this property? Tax deductions from depreciation don't really matter so much, because you have to pay that back when you sell (the joys of "depreciation recapture tax").

The "do it 5 more times" forgets to address WHY it's worth 3x the purchase price. Was it rehab, or (as I suspect) market forces that have RE prices irrationally high right now. 

That said, do you have a better place for the $ to be right now? I'm in a similar position in that I own property that has appreciated dramatically, but if I sell it, there's nothing I like better that I could afford, and capital gains/depreciation recapture would eat me alive. In your case you might be able to do a 1031 for a nicer SFR close to home that would be easier to manage and still turn a similar income. There are actually quite a few people who move from SFR up to multi-unit.

Old post, but a contractor who doesn't get the bid but says he's going to show up on the jobsite to make sure the winning contractor is doing a good job? OH HECK NO! That's stalker behavior. I'm with previous posts -that's a drug addict or complete whacko.  Polite but firm response that since he didn't get the bid, there is no need for him to "inspect" the job, and that under no circumstances should he to be on the property. Pointing out how creepy that behavior is might help if he's just young and dumb. 

Is it possible that they are just flagging "mismatch"  accts? I would also wonder if the "i" dotting and "t" crossing is to get loans gussied up to sell, or if they are getting ready in case they have a flood of foreclosures. Bad paperwork was a problem in '08, so the banks would have learned. Drat if they are though, because do I have one loan that is a mismatch.

I mis-understood. I thought the back guy was the PITA. Same answer though - offer an open door. 

 As long as you aren't dealing with rent control the AC is an easy one; time for a bit of financial education.  Explain how landlording works -- investments have to have a return. Calculate the cost of a new system over a reasonable time frame (maybe 3 years).  You will gladly put in the AC, as long as he agrees to a voluntary rent increase to cover the cost. It's possible that the cost may turn out to be something nominal ($15-20 month) and the more efficient system will save him enough in power bills to be worth it (we once replaced a fridge that literally paid for itself by a power bill that dropped $60/month). 

I think this guy needs to not be in multi-family.  

So what you are dealing with sounds like a pissing match, with possession maneuvers on both sides (one party is "claiming" the space with pools & bikes, the other demanding the kids/ party never use the driveway space). It is reasonable to have guidelines on parties (ie Fri/Sat only, ending no later than 9pm, no more than 12 people, etc), waivable with permission from the other tenant (nothing makes people more polite than wanting something from the other party).  

I'm assuming that FMV is being charged on both units, and that one pays 4x simply because it's larger. Both tenants should have equal rights to shared space. You should probably require that for safety and liability reasons a clear path of a specific width (ie 3 feet) be left on one side of the driveway at ALL times (no bikes, no pool, no BBQ). Also, next time a complaint is made, offer the PITA party that since they are unhappy at the place, ONE TIME ONLY they can have the next 30 days as a no penalty, "free to move at any time" window (ie no 30 day notice needed). Often when presented with an open door the people realizes the issues aren't worth moving over.